Introduction: The System and its Reforms

The German federal system has been undergoing numerous changes as per the Federalism Reform Act of September 2006, based on the deliberations of the so-called Federalism Reform Commission I (Kommission von Bundestag und Bundesrat zur Modernisierung der bundesstaatlichen Ordnung – Bundesstaatskommision). Further alterations in the financial area followed after a Federalism Reform Commission II reported in March 2009. These changes and the further plans are still and will continue to be the subject of much public and scientific debate and controversies.

Such controversies cen'tre around criticisms to the effect that the changes are incomplete and inadequate because as in previous reform efforts they suffer from several taboos, which were self-imposed in both Reform Commissions and which are outlined here in the context of the financial constitution and above all in the last part of this chapter. Due to those taboos, it is said, the changes have made and will make the federal system even more intransparent and inefficient rather than improving it.

The aim of this chapter is, therefore, to describe and to inquire into these charges step by step in the relevant fields. That, however, can hardly be done without simultaneously providing an orientation on the structural characteristics, problems, and controversies which shape and define German federalism at the end of the second decade of the post-unification era.

Introduction

Over the last 40 years, the Belgian unitary and relatively centralized system has gradually been transformed into one of the most decentralized federations. The Belgian experience illustrates how a mixture of self-rule and shared-rule has allowed – sometimes with significant tensions – several cultural communities to share a common political space. Belgian federalism offers a number of lessons and warnings concerning the role which institutional design may play not only in fostering accommodation, but also in generating confrontation.

Tensions between political parties representing the two main sociocultural groups (the Flemish and the French-speakers) were so great following the 2007 federal elections, that it took over nine months to form a governing coalition. The ensuing government was marred by so-called ‘inter-community’ conflicts, which only, temporarily, receded in the face of the 2008–2009 financial crisis. The coalition fell apart in 2010, again over disagreements between the Flemish and the French-speaking parties, mainly concerning the splitting of an electoral ridding. The result of the insuing election was that the main party in Parliament is a Flemish nationalist, with a long-term project for Flemish autonomy. While there is no clear, structured, project for secession (or implosion) of this essential ‘two-unit’ bipolar federation, many observers are doubtful that the country will remain united over the next few decades. Decoding the underlying reasons for this nearly schizophrenic incapacity to live together – or to be truly be apart – requires an appreciation of the sociological and historical background of this small country, as well as an understanding of its complex and fascinating institutional set-up.

Introduction

The 1988 Constitution brought important changes for the Brazilian federation and the sub-national finances. Tax powers of states and municipalities increased at the same time their share on the main federal taxes more than doubled in relation to the previous Constitution, with no conditions attached to the use of these resources (except elementary education), whereas access to credit became subjected on approval by the federal Senate, only. Therefore, sub-national governments got autonomy to manage their own businesses.

However, over time this situation changed. Much of the gains began to reverse first slowly, then at a faster speed. Federal government regained its previous position in the division of the fiscal pie, at the expense mainly of the states. Municipalities were able to sustain their gains, but the impossibility of reaching agreement for changing the revenue sharing apportionment formula, together with mounting constraints to the use of local resources, led to great horizontal inequalities that impinged on the efficacy of policies carried out at the local level.

From the mid-nineties, fiscal policy became subjected to the macroeconomic goals of monetary stabilization. Being elected as the cornerstone of the macroeconomic stabilization plan, the fiscal adjustment carried out in the second half of the nineties brought a huge increase in the overall tax burden to redress past deficits in the public accounts and generate enough surplus to keep the rate of public indebtedness to the GDP at bay.

Federalism is a political device to maintain unity and diversity. According to Blackwell Encyclopedia of Political Institutions, federalism is:

In its broadest sense, federalism is a kind of political mechanism involving at least two orders of government in the same political space with ‘shared’ as well as ‘self’ rule in constitutionally divided jurisdictions such as that each is meaningfully autonomous from the other in their exclusive areas and functionally interdependent and cooperative in their concurrent areas. A survey of the federalist thought and theory suggests that:

Thus federal state may well be an answer to the problem of the nation-state in the age of globalization when the state is said to have become too small for global problems and too big for local ones. Beyond the nation-state as well confederal supra-national regional integration is also making some headway.

Introduction

In its 1996 Constitution, South Africa adopted a system of multi-level governance divided into three ‘spheres’ of government – national, provincial and local – that are to be ‘distinctive, interdependent and interrelated’ [Section 40(1)]. Each is established by the Constitution, each has assigned powers, and each is independently elected. In addition, sovereignty is divided – provinces must agree to certain fundamental constitutional amendments. Thus, South Africa bears the hallmarks of a federation – albeit a highly centralized one. Nine provinces were established at the outset of the democratic dispensation. The system of ‘wall to wall’ local government extending from the dynamic metropolises of Johannesburg, Cape Town and Durban to the remotest rural areas was established a few years later.

But when a new constitutional model for a democratic South Africa was first discussed in the early 1990s, the African National Congress (ANC) and others in the freedom movement were deeply suspicious of federalism. It was the out-going white-dominated Apartheid regime and the Zulu-nationalist Inkatha Freedom Party that insisted on federalism as a condition of a final constitutional settlement. The out-going regime believed that federalism would contribute to limited government and restrain the majority that was about to take office. Some harboured the dream that in a federal South Africa there might be room for an Afrikaans province or homeland. The ANC acquiesced, but remained deeply reluctant federalists. For the ANC, federalism and decentralization were indelibly linked to the Apartheid model of Bantustans – quasi-autonomous puppet regimes that would deny Black South Africans full citizenship in the country.

Federalism today is the most popular idea in the discourse on government and governance. The survival of the Indian nation is increasingly attributed by political scientists in the country and abroad to consolidation of democracy, and now to the growing practice of federalism. Federal idea is catching on today in the Afro-Asian part of the world where federalism is being seen as an institutional device to stave off separatism by offering the choice of shared rule as well as self rule. For example, Ethiopia became an ethnic federal republic in 1995 with a parliamentary system and the unique system of federal second chamber, the House of Federation, the sole custodian and interpreter of the Constitution, a role typically reserved elsewhere for the Supreme Court or the constitutional court. Moreover, the newly elected Constituent Assembly of Nepal has started the move since 2008 to draft a federal democratic constitution. The failure of the first half-hearted parliamentary federal experiment in Pakistan in 1971 and persistent Tamil ethnic separatism verging on civil war in Sri Lanka (finally militarily crushed in 2009) may perhaps prompt guarded receptivity to the federal idea, though the political establishments in Sri Lanka and Pakistan have yet a long way to go in this direction. The same is true of China which may be said to be a de facto quasi-federal system especially in relation to Hong Kong. Among these aspiring or ambivalent political systems vis-à-vis federalism, only Sri Lanka and Nepal are democratic.

Introduction: Mapping Paradoxes and Challenges

Let us formulate the following with a hypotheses:

One can now turn to the Swiss model of multiculturalism and understand the reasons that make this model successfully work.

The Canadian federal structure devised in 1867 proved remarkably effective and adaptable during its first century in adjusting incrementally to the many changing conditions within Canadian society and in the external world. Between the 1960s and the 1990s, however, it clearly came under increasing stress. Indeed, Donald Smiley, a leading scholar of Canadian federalism, writing a book about the problems facing Canada in the 1970s, was driven to choose the title Canada in Question. In 1992, after 54 per cent of its people and six of its ten provinces had said ‘No’ in the referendum of October 26 to the set of constitutional proposals constituting the Charlottetown Agreement on which they were asked to vote, fundamental constitutional issues were left unresolved, and the future of Canada seemed again to be in question.

The Unresolved Structural Problems of Canada

By most standards, Canada during the 125 years since Confederation, had been up to 1992, a country of extraordinary accomplishment, admired and envied throughout the world. That year a United Nations report ranked Canada as the best country in the world to live in. But the question is if Canada had been a land of such achievement, why did it appear to be in such constitutional disarray? The answer to that question lay in four sets of structural problems that Canadians had difficulty to resolve.

Introduction

The EU is in search of improving its democracy and legitimacy record. Referendums in Denmark and France on the Maastricht Treaty, and in Ireland on the Nice Treaty, revealed the limits of the permissive consensus underpinning the process of European integration. Since then, support for the European Union suffered further setbacks as illustrated by the rejection of the European Constitutional Treaty by a majority of French and Dutch voters in the Spring of 2005 and the surprising Irish no-vote against the Lisbon Treaty in the Spring of 2008.

Constitutional reform has been on the agenda of the EU for more than a decade. The Maastricht Treaty (Treaty on European Union or TEU), signed in 1992 meant a major breakthrough in the political and economic integration of Europe, as it propelled the birth of the single currency (Euro) and developed the notion of a ‘three-pillar structure’ with the Common and Foreign Security Policy (CFSP) and Justice and Home Affairs (JHA) as two new ‘intergovernmental’ pillars of European co-operation, alongside the ‘supranational’ pillar covering economic and monetary integration. The Amsterdam Treaty (1998) extended this process, by strengthening the notion of a European citizenship and increasing the powers of the European Parliament. The Nice Treaty (2001) was meant to prepare the EU for its significant Eastward enlargement by adapting its institutional structure, initially developed for only six member-states, to suit the needs of no less than twenty-seven member-states.

For the historian of political thought who is not blinded by the officially sanctioned classical canon, the case is quite clear – federalism has been an alternative category of political thought only for a brief moment in the history of human affairs, those 350 years or so associated with the rise and the crisis of the modern state. And even this has been true only for a small part of the world – the western world of state organized capitalism. Elsewhere, and at other times, federalism has been the norm, the principal form of social organization.

As my linchpin of evidence I will use the political theory of Althusius which was first published some 400 years ago. It was explicitly directed against Bodin's doctrine of state sovereignty, and it systematically summed up the federalist wisdom of the pre-statist world. However, this chapter is not about Althusius. It is about Althusian evidences in theory and practice, past and present.

The core of the Althusian argument is that sovereignty cannot be constructed as an abstract category of absolute power, be it in the hands of a prince or an assembly, and that it must be understood instead as the result of a process of negotiated agreements among a plurality of autonomous collectivities. Ultimately, in other words, sovereignty exists only when and as long as that process works.

For political theory and for federalism this has important implications. If sovereign disposition upon the parameters of organized social life manifests itself as an ongoing process rather than a final product, everything is up for grabs.

Since 1991 the relations along the axis ‘center-regions’ have been one of the main factors determining stability and effective development of Russia. Federalism and regionalism have brought into life new elements and networks, becoming themselves actors in the political game and thus creating system effects. The entire development of Russia starting from 1990 until today has been a complicated, controversial period of the transformation of a unitary state into a federation.

Federalism is mainly a political phenomenon, a form of political conflict between individuals with different interests regarding the principles of government organization and institutional design. In the federal context the process of determining ‘who will get what, when and how’ appears to become a sort of political bargaining on whose version of the federal union is to be actually implemented. As a result the political role of regions depends on the level of their autonomy and their ability for participation in federal decision-making process. In Russia these two crucial things have been in constant process of change.

1990–1992 (until March): the so-called Parade of Sovereignties

During that period the ethnic formations within Russia (former autonomous republics and okrugs) sought to upgrade their political status, to win recognition as independent republics as a part of the Russian Federation (RF). Movements for sovereignty were led by the republics of Tatarstan, Bashkorostan, Yakutia and others. At the same time the national idea, the idea of the restoration of ethnic states, language and culture clearly prevailed.

Introduction

Unlike other countries studied in this volume, Nepal is not yet a federal state. Nepal is now engaged in the drafting of a new constitution, which, it has already been decided, must provide for a democratic, federal state. Nepal is currently debating the form that federation will take. This chapter examines the circumstances that have given rise to the demand for federalism, and the kind of choices facing Nepali in designing a federal system.

Nepal is poised to adopt a new constitution which could provide the framework for dealing with the problems of exclusion, including political participation, which have been so prominent in the national agenda since the People's Movement of 2006. The Constituent Assembly (CA) was elected in April 2008 to draft and adopt a new constitution, within two years of its first meeting, which took place in May 2008. The CA has an unrestricted mandate under the Interim Constitution (IC) to decide on the values, principles and institutions for inclusion in the constitution, except in two important respects – firstly that the CA had to ‘implement’ a republic at its first meeting (Article 159, amended on 28 December 2007), and secondly that Nepal must become a ‘progressive democratic federation’ (Article 138, as amended on 13th April 2007).

The details of the federal system are not spelled out, but the purpose of moving to a federal system is clearly stated.

Introduction

Much like India before 1990s, Malaysia is a centralized parliamentary federalism characterized by one-party predominance. However, Malaysia has never experienced party alternation at the federal level as India first had in 1977. Also unlike India's Congress Party central government, which had to deal with opposition parties controlling half of the state governments as early as 1967, merely twenty years after Independence, Malaysia's National Front [Barisan Nasional (BN)] had never lost the control of more than two out of 13 state governments at a time from 1955 till 2008.

Because of BN's dominance at both federal and state level, the federal-state inter-governmental relation is much characterized by intra- or inter-party relations. Through intra-party control, the BN state governments behave more like branches than partners of the federal government. The top leadership of the United Malays National Organization (UMNO) that dominates the BN coalition would dictate the chief ministers to head the state governments, akin to how India's Congress party operates, except that the federal's choice may be vetoed by the hereditary heads of state. Meanwhile, seen as anomaly, state governments controlled by federal opposition parties are often discriminated, penalized or ignored.

One important dimension in Malaysia's centralized federalism is the palace-party relation as the Federation and nine of her 13 constituent states are constitutional monarchies. Revered as the guardian of Malay political supremacy and Islam, the Palaces still command deference amongst many Malays and have developed a cooperative and competitive relation with UMNO, especially after the fading out of its aristocratic leadership.

Introduction

Comparing Ethiopia with other countries on the African continent, one can observe similarities and distinctiveness. Unlike any other sub-Saharan country, Ethiopia has never been colonized by any European country and unlike most other African countries, Ethiopia opted for a federal political system in the 1990s after the end of the military rule. While most African countries are also characterized by significant ethnic and religious diversity, most of these countries discarded the idea of federalism as a principle of state organization. The question why Ethiopia opted for a federal system and how the distinct features of the Ethiopian federal system can be explained and understood is the focus of this chapter.

Comparing Ethiopia with other federal systems, one will come across a number of features which are rarely found elsewhere. The founding on ethnic groups and the constitutional interpretation through the Upper House of Parliament can be mentioned as examples. It can be argued that the institutional set-up of the federal system can be explained to a large part by Ethiopia's history. Using assumptions of institutionalism this chapter will try to explain the specific characteristics of the Ethiopian case. Since institutionalism as theoretical framework has been discussed at length, it will not be discussed again in this chapter. The following section will briefly outline historical events which are assumed to be of explanatory value for the development into federalism. Thereafter the specific characteristics of the Ethiopian federal Constitution will be explained and discussed.